Friday, March 25, 2011

Christina Romer tells Ezra Klein that cutting spending now won't show people that it's going to be under control, but spending more now with promises to fix it later will!

People, I am not making this up:

If people do think we’re out of control of our budget, that surely can’t be good for investment. But how do we show we’re in control? House Republicans say it’s by cutting $61 billion out of this year’s budget. A more sensible view is that $61 billion won’t do anything, so why would anyone be reassured by that? The more sensible thing is we should have a package for short-term stimulus that also includes concrete policies that deal with the deficit, which means entitlements and taxes and defense spending and everything else.

Yeah, only a moron would think that cutting spending now would make people feel better about the budget. Just let us spend a little bit more now and we promise will fix EVERYTHING real soon!

At a blog called Angry Bear, someone named Rebecca Wilder put up a post claiming that the "corporate savings glut" is what is causing unemployment. Since then, Mark Thoma has both linked to the post and later quoted it at length, so I decided to take a look.

Not good.

The first problem is treating accounting identities as causal mechanisms, as in "elevated excess private saving (firms and households) keeps the government deficit in the red." People, you can't do meaningful comparative statics on accounting identities! There is no causal chain in an accounting identity!

The second problem is that Wilder is making up variables on her own account namely private excess savings and corporate excess savings. She is somehow able to divine these clearly endogenous and unobservable variables from the Fed's flow of funds data (I believe by assuming that ALL saving is excess saving*)! Personally, I would say that by definition, from the point of view of the household, excess saving is always zero!

The third and most egregious problem is conflating correlation with causality. Wilder shows that the correlation between the "corporate savings glut" and unemployment is .71 and leaps to the conclusion that corporate savings is causing unemployment! Of course it is equally possible (given the analysis done there) that unemployment is causing corporate savings.

But the most likely situation is that some set of third factors are causing both unemployment and corporate saving. Both of these variables are clearly endogenous in any sort of general macro model, and a realistic analysis would need to be with something like a structural VAR based on a clear identification scheme.

Corporate cash balances are high. Unemployment is high. That doesn't mean that one is causing the other.

*here is Wilder's stated definition: The excess corporate saving rate is the residual of the Current Account (external saving) net of government and household excess saving.

Wednesday, March 23, 2011

Russian Prime Minister Vladimir Putin frolicked with the real-life mascot of the 2014 Winter Olympics over the weekend, an endangered snow leopard that had been injured in the valleys of central Siberia.

The cat is called "Mongol" by local scientists who rescued it after a harrowing ordeal at the hands of poachers.

Putin broke a business trip to Russia's Far East to visit it in the Khakassia region some 3,500 km (2,000 miles) east of Moscow.

Ummm, OK, so Vlade is a judo black belt, I guess he is well equipped to frolic with a full grown wild animal with a full set of teeth and claws. Maybe he will ride it? or carry it on his shoulders? or just snuggle with it?

Now here's a link to the video showing what passes for frolicking when you are the dictator of Russia and the international press LOVES you.

Apparently frolic actually means to pose crouching for the cameras 10 feet away from the perimeter of the cage holding the snow leopard!

Which of the accounts below is the Onion? That is, three are real, one is...also real, but from the Onion.

1. U.S. court calls in Barry Bonds's former...um... associates to testify on the size of the equipment "down there" to determine if steroids may have had an impact. "Curious changes in Barry Bonds’ body -- including testimony that his head and feet grew while his testicles shrank -- will be detailed in federal court this week as the government seeks to prove that the Home Run King perjured himself by telling a grand jury that he never used steroids."

4. "Authorities say 27-year-old Karin Mackaliunas was detained last weekend following a crash. Scranton police say they found three bags of heroin in her jacket and after being taken to the police station she told investigators she had more hidden in her vagina...A doctor recovered 54 bags of heroin, 31 empty bags, prescription pills and $51.22."

The highlight of our trip was provided by a 40 foot female humpback whale who apparently fell in love with a 25 foot boat.

Really!

We were in the other boat, when we got an excited radio call to come join the first one because something amazing was happening. We scooted over and saw a whale near the surface and very close to the first boat.

The boss man, Gene Flipse, called us into the water. After getting a look at the situation, I flippered over and asked Gene what was up.

He very matter of factly replied "The female is ready to mate and she's taken quite a shine to our boat".

She just kept circling and circling the boats (by this time we'd tied them together), or passing underneath them. Sometimes right side up, sometimes, upside down. This lasted for about 90 minutes.

The whole time, there was a very interested male whale waiting patiently for our girl to come to her senses, and they finally did leave together.

Abstract: A substantial body of research suggests that economists are less generous than other professionals and that economics students are less generous than other students. Following Frey and Meier (2003), we address this question using administrative data on donations to social programs by students at the University of Washington. Our data set allows us to track student donations and microeconomics training over time in order to distinguish selection effects from indoctrination effects. We find that there is a selection effect for economics majors, who are less likely to donate than other students, and that there is an indoctrination effect for non-majors but not for majors. Women majors and non-majors are less likely to contribute than comparable men.